STATE MAY SPONSOR PRIVATE PENSIONS

Bill would require companies without retirement programs to join new California system

As the nation debates public health care and governments grapple with public employee pension obligations, California may be on the verge of a new entitlement — state-sponsored retirements for private workers.

Senate Bill 1234, known as the Golden State Retirement Savings Trust Act, would create a state system that all California companies with more than five employees would be required to join if they lack a private retirement program.

The bill, sponsored by state Sens. Kevin De Leon, D-Los Angeles, and Darrell Steinberg, D-Sacramento, seeks to create a safety net for the nearly 7 million residents who don’t have employer-backed retirement, and would guarantee workers a return on their investment into the plan.

Gov. Jerry Brown has until Sept. 30 to act on the bill, which passed along partisan lines in the last moments of the legislative session that ended last month. Independent Assemblyman Nathan Fletcher of San Diego voted no, with the Republicans.

San Diego’s leading labor groups and Democrats have hailed the measure as a critical step to protect the state’s poorest workers, who often don’t have access to private retirement plans.

Business groups, insurance companies and Republicans paint a different picture: They see it as a massive boondoggle that duplicates private-sector retirement services and could put taxpayers — or employers — on the hook for billions of dollars in pension shortfalls.

“To argue that Californians would benefit from this type of program that competes with many private-sector programs that are more efficiently run is frankly a joke,” said Lani Lutar, president of the San Diego County Taxpayers Association. “There is absolutely no reason California has to establish a new state-run pension system when the state can’t support its existing services.”

If Brown signs the bill, the program would not take effect until a feasibility study takes place to determine if the program can pay for itself. After that study, the program would have to go back to the Legislature for another vote before being implemented.

Once in place, the law would create a retirement trust that would be administered by a seven-member panel. The panel would be chaired by the state treasurer and include the state controller and finance director.

Businesses that employ more than five people and don’t have a retirement program would be required to enroll their employees in the system and withhold 3 percent of their pay unless the employee opts out of the program. The fund would be split into two pots, one for investment and a smaller one — no more than 1 percent of the total fund — for administrative costs.

The bill gives smaller companies (fewer than 100 employees) at least six months to enroll in the program once it launches, or face fines.

A recent study by the research arm of the University of California Berkeley Labor Center showed that 6.3 million people in the state work for private employers that do not sponsor a retirement plan, and that the percentage of workers with access to such plans has steadily declined since peaking in 2000.